By Megumi Fujikawa
TOKYO--The Bank of Japan is likely to stand pat again next week, given continued uncertainty about trade negotiations and the impact of tariffs on the global economy.
The BOJ's policy board is also set to review a reduction in its government bond purchases, with what it is planning after April 2026 under close scrutiny due to a recent rise in yields of super-long bonds.
The Expectation: At a two-day meeting ending Tuesday, the Japanese central bank is widely expected to maintain its policy rate at 0.5%, the level it has been at since the last hike in January, before trade frictions deepened.
Japan's trade negotiator, Ryosei Akazawa, has visited Washington multiple times but it remains unclear how the talks will conclude. The two countries are looking to hold a meeting between President Trump and Prime Minister Shigeru Ishiba on the sidelines of the Group of Seven leaders' meeting next week.
JGB Purchases: BOJ policymakers are expected to examine the effects of the central bank's reduction in Japanese government bond purchases and discuss further plans. The central bank is cutting its JGB buying by 400 billion yen per quarter until March 2026.
Minutes of a recent meeting between the central bank and bond market participants showed various opinions about the pace of reduction beyond April 2026. Some say the BOJ should cut purchases faster, while others say it should do so more gradually.
New Plan: BOJ Gov. Kazuo Ueda has said the bank will aim for predictability in its tapering plan, though bond yields should be determined by markets. Policymakers believe that the bank should limit its presence in the bond market because it has already scrapped the yield curve-control policy.
"To completely disregard the risk of rising long-term interest rates and push ahead with normalization would be an extreme approach. I believe the pace of normalization should be flexibly determined, taking financial market conditions into account," said Nobuyasu Atago, an economist at Rakuten Securities Economic Research Institute and a former BOJ official.
He expects the BOJ to cut bond purchases by 200 billion yen each quarter, starting in April.
What's Next? The BOJ has maintained a stance of seeking further interest-rate increases. With the economy slowing due to tariff concerns and inflation expected to ease later this year, some economists say that the central bank may not be able to make any tightening moves this year.
BOJ officials will be closely monitoring the next tankan survey due in July to see whether companies have become more cautious about business conditions and investment plans.
Write to Megumi Fujikawa at megumi.fujikawa@wsj.com
(END) Dow Jones Newswires
06-13-25 0701ET
